Having an unexpected medical bill can be a challenging situation. Most of us have been impacted by unforeseeable healthcare debt – or have a friend or family member who has – especially in the last 2+ years of the COVID-19 pandemic.
According to the Kaiser Family Foundation, most medical debt (about two-thirds) is the result of an acute condition – often, an unexpected, short-term illness or injury. As a result, most of these medical issues weren’t foreseeable for the Americans who experienced them.
With this knowledge, the top nationwide credit reporting agencies (NCRAs) recently made the decision to exclude certain types of medical debt from credit reports to “help people to focus on their personal wellbeing and recovery.” (TransUnion)
Beginning on July 1, 2022, the top NCRAs (Equifax, Experian, and TransUnion) will exclude most medical debt from consumer credit reports, including all paid medical debt. Unpaid medical collection debt will not appear until one full year after it was acquired – giving consumers more time to pay down their healthcare bills before they see an impact on their credit score.
The NCRAs estimate that these changes will eliminate about 70% of all existing medical debt from Americans’ credit reports. In the first half of 2023, the NCRAs will also start excluding any medical debt less than $500 from credit reporting.
In a joint statement, the CEOs of Equifax, Experian, and TransUnion said: “Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing. As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”
This is great news if you have outstanding medical debt, as you may see an improvement in your overall credit score later this summer. For many Americans, an improved credit score may open the door for homeownership opportunities.
Loan Solutions for Less-Than-Perfect Credit
While eliminating medical collections from credit reports may improve your credit score, Waterstone Mortgage still offers a variety of options for those with lower credit scores.
- FHA loans: 580 FICO
- VA loans: 580 FICO
- Conventional loans: 620 FICO
- USDA loans: 580 FICO
Low-Down-Payment Loan Options
If you’re working on paying off medical debt – or any other debt – you may benefit from a mortgage loan program with a lower down payment requirement. Some examples include:
- USDA loans: No down payment
- VA loans: No down payment
- Home Possible® loans: 3% down payment
- Conventional loans: As low as 3% down payment
- FHA loans: As low as 3.5% down payment
- Construction loans: 5% down payment
Additionally, there are many down payment assistance programs available for first-time homebuyers.
If you’re hoping to purchase a home soon, find an experienced loan originator in your area – and get started with a complimentary consultation.
